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Image © ABC 2009
Cartel Criminalisation as Cultural Change A report from findings of a survey of the Australian public
Caron Beaton-Wells
Melbourne Law School, University of Melbourne
Presentation at ICN Cartels Workshop
5 October 2010
2
About the presentor
Associate Professor Caron Beaton-Wells is an academic specialising in competition law at the
University of Melbourne Law School, and is the Director of the University’s Competition Law &
Economics Network (www.clen.unimelb.edu.au). Her recent research focuses on cartels. This
research has produced a series of conference papers, book chapters and journal articles in Australian
and international journals. She is also a co-author with Professor Brent Fisse, of Australian Cartel
Regulation: Law, Policy and Practice in an International Context, to be published by Cambridge
University Press in 2011 and, a co-editor with Dr Ariel Ezrachi, of Criminalising Cartels: Critical Studies
of an International Regulatory Movement, to be published by Hart Publishing in 2011. Dr Beaton-
Wells teaches competition law at undergraduate and graduate levels and directs the specialist
graduate program in competition law at the Melbourne Law School
(www.masters.law.unimelb.edu.au/competitionlaw).
This presentation is based on research undertaken for a major Australian Research Council-funded
project over three years into cartel criminalisation in Australia. Information about the project is
available at www.cartel.law.unimelb.edu.au. The statistical assistance of Chris Platania-Phung is
gratefully acknowledged.
3
About this presentation
• The Melbourne Law School Cartel Project
• Cartel criminalisation as cultural change
• The ACCC campaign to criminalise cartel conduct
• Survey findings
General awareness and support for competition law
Views on treating cartel conduct as a crime
Views on penalising cartel conduct
• Reflections
4
The MLS Cartel Project (1)
• Aims
– investigate how and why cartel criminalisation has taken place in Australia
– assess the likely impact on deterrence and compliance
– compare policy and experience overseas (esp. US and UK)
– elicit possible insights for other jurisdictions and other forms of business
regulation
• Empirical components
– interviews with stakeholders
– interviews with prior offenders
– public survey
5
The MLS Cartel Project (2)
• The MLS Cartel Project Survey
– online survey
– 1,334 randomly selected respondents
– representative of the Australian public
– multi-stage design to test accuracy and validity
– wide ranging scope to cover views on how the law should respond to cartel
conduct and how legal sanctions are likely to affect deterrence/compliance
– use of simple factual scenarios to elicit views while avoiding technical and
leading language
– results will be relevant in various ways, including to the design of outreach and
enforcement strategies
– data phase completed in July 2010; full set of results to be available in December
6
Cartel criminalisation as cultural change (1)
• Global movement in favour of tougher laws and sanctions for ‘hard-
core’ conduct since late 1990s
• Heavy emphasis on individual deterrence through criminal
sanctions, particularly jail
• Influence of US experience – record level of criminal cases,
convictions and jail sentences over last 10-15 years
• More than 20 countries have now adopted a form of criminalisation
• But most of these regimes are relatively new, the criminal
enforcement record is patchy and, beyond US borders, the debate
as to the merits of criminalisation is still active
7
Cartel criminalisation as cultural change (2)
“Criminalization and similar major adjustments in a legal
system do not ‘occur in a vacuum.’ Social and political
acceptance for robust criminal antitrust enforcement will vary
across nations depending on each country’s legal framework
and sensibilities. It is unlikely to emerge automatically on the
day a criminal statute becomes law. Existing norms that
disfavor criminalization of antitrust offenses need not be
immutable, but a careful analysis of existing conditions is
necessary to understand what must be done to gain
acceptance for criminal punishment.”
W E Kovacic, ‘Criminal Enforcement
Norms in Competition Policy’, 2010
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Cartel criminalisation as cultural change (3)
• Cartel criminalisation is not just about changing the law. It is about
changing socio-cultural norms.
• A range of stakeholders must be engaged and persuaded, including
politicians
the legal profession, including prosecutors and judges
members of the general public as taxpayers/voters and jurors
the media and other commentators
(most importantly) the business community
• It will be a slow process – in the US it has taken over a century.
9
The ACCC campaign (1)
• Chairman Allan Fels floated the idea in
1994
• ACCC made a formal submission to an
independent review in 2002 and won support
• Conservative government fell into line in
2005
• Victory in Visy case in federal election
campaign in late 2007 – record breaking
penalties against high profile defendants
• Newly elected Labor government
introduced draft legislation in January 2008
• Reforms passed in June 2009 after
protracted consultation over drafting
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The ACCC campaign (2)
• The platform for the ACCC’s criminalisation campaign has been building for
over 20 years
• From the early 1990s the agency began to establish itself as a politically
powerful, committed and effective enforcement agency
• ‘Cracking cartels’ has been its top priority for at least the last decade
• The policy has been to bring penalty proceedings, <90% of which have
been won by the agency, mostly without a contest
• Penalties have not been high by US or EU standards but collateral and
reputational costs have been ‘leveraged’
• At the same time there has been considerable investment in educating the
business community about the harms of cartels and promoting the benefits
of voluntary compliance
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High level of awareness
of competition / cartel-
related topics
Survey findings General awareness and support for competition law (1)
9 in 10 respondents had heard
or read of at least one of these
topics
Highest levels of awareness
amongst older people, men
and managers, esp. from
large businesses
Heard or read of……
%
Price fixing 79.5
ACCC 77.5
Case involving Richard Pratt
and the ACCC
46.1
Case involving Visy and
Amcor for price fixing
38.5
Allan Fels 37.6
Cartels or cartel conduct 28.5
Graeme Samuel 20.1
Criminal penalties for cartel
conduct
15.2
Haven’t heard of any of these 11.1
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Survey findings General awareness and support for competition law (2)
13
Survey findings General awareness and support for competition law (3)
• ‘Price fixing’ scenario used in survey
There are two butchers in a town. In the past they have set their prices independently of
each other. This has meant that if one butcher put up its prices, consumers could
switch to the other butcher to find a lower price. The butchers have now reached an
agreement with each other to set the prices they charge for the most popular cuts.
As a result, they can charge higher prices because if consumers are unhappy with
the price at one butcher, they are unable to switch to the other butcher for a better
price.
‘agreement between competitors on prices’
• Similar scenarios used for market allocation and output restriction
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Survey findings General awareness and support for competition law (4)
Conduct
type
Yes
%
No
%
Not
sure
%
‘Price-fixing’ 70.9 16.8 12.3
‘Market
sharing’ 67.1 18.5 14.4
‘Output
restriction’
68.7 17.6 13.7
High level of support
for treating cartel
conduct as against the
law
Positive association
with view of
competition as
healthy
15
Survey findings Treating cartel conduct as a criminal offence (1)
Agreement
Conduct type Yes
%
No
%
Not
sure
%
‘Price-fixing’ 44.3 42.8 8.8
‘Market sharing’ 36.6 51.6 7.8
‘Output restriction’
44.6 45.5 7.1
A large proportion of the
public do not think that
cartel conduct should be
treated as a crime
But support for treatment as a
crime increased with level of
cartel awareness
Men and managers, esp.
from large businesses were
most likely to support
treatment as a crime
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Survey findings Treating cartel conduct as a criminal offence (2)
Reasons
• The ACCC advocated several reasons for criminalisation
economic harmfulness of cartels
need for greater deterrence
cartel conduct is akin to other crimes, eg theft
such conduct warrants moral opprobrium
major trading partners have criminal sanctions
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Survey findings Treating cartel conduct as a criminal offence (3)
Reasons
Reasons
Because the conduct involves deceiving consumers
Because the conduct is dishonest
Because making it a criminal offence will deter
Because the conduct will harm competition or the
free market
Because making the conduct a criminal offence will
allow for punishment
Because consumers may have to pay more
Because the conduct should be seen as the same as
theft
Because the conduct may harm or be
unfair to other competitors
Most common
response
Strongly agree
Strongly agree
Strongly agree
Strongly agree
Strongly agree
Strongly agree
Strongly agree
Agree
Most common
response
(%)
64.0%
62.9%
59.1%
54.5%
52.5%
50.0%
47.6%
44.0%
Moral reasons had highest % of strong agreement
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Survey findings Treating cartel conduct as a criminal offence (4)
Reasons
• Morality was also a consistent theme in respondent comments eg:
‘it is a fraudulent and dishonest practice’
‘nothing more than theft by another name’
‘its not fair for the consumers’
‘it is morally wrong, regardless of what the law says’
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Survey findings Treating cartel conduct as a criminal offence (5)
Relative to other crimes
‘Just as serious’ comparators also reflect ACCC’s moral message
As compared to price fixing ... Most common response
A person stealing another person’s property is... Just as serious
An insurance company denying a valid claim to save
money is... Just as serious
A company director using their position dishonestly to
gain personal advantage is ... Just as serious
A company evading government income taxes is ... Just as serious
A person using inside information in deciding to buy or sell
shares is ... Just as serious
A person killing another person is ... Alot more serious
A person sexually abusing another person is ... Alot more serious
A company misleading consumers about the safety of
goods is .... Alot more serious
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Survey findings Treating cartel conduct as a criminal offence (6)
Acceptability of immunity policy
Do you agree it is acceptable to give immunity to the first company to report?
Lack of support for immunity policy could also suggest moral concerns
Only 26.3% agreed
that immunity policy
was acceptable in a
case of price fixing
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Survey findings Penalties for cartel conduct (1)
Individuals
0 20 40 60 80
Other
Don't know
No penalties
Compliance program
Compensation
Naming & Shaming
Disqualification
Fine
Jail
%
Men more likely to
support jailing
individuals than
women
Support for jailing
individuals
increased with level
of cartel awareness
Low support for jail as a cartel sanction
22
Survey findings Penalties for cartel conduct (2)
Companies
Strong support for fines and naming and shaming also of companies
Highest support was
for a fine 3 times the
profit made from the
conduct
23
Survey findings Penalties for cartel conduct (3)
Context
Lack of support for mitigating factors + coercion and concealment
seen as aggravating – reflective again of moral emphasis
Aspect of the conduct Most common
response
Most common
response (%)
The companies involved in the conduct were small
businesses
Just as serious 80.1
The profits from the conduct were used to make
products that are environmentally friendly
Just as serious 79.5
Prices did not go up as a result of the conduct Just as serious 58.0
The reason for the conduct was that it would prevent
factories from closing and would save jobs
Just as serious 49.9
The conduct included bullying another company into
joining the agreement
More serious 82.0
Elaborate steps were taken to make sure the
authorities did not find out about the conduct
More serious 77.5
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Survey findings Penalties for cartel conduct (4)
• Comments again bear out concern with moral character rather
than effects of conduct
‘I don’t believe the end justifies the means’
‘there can be no excuse for price collusion whatsoever’
‘if something is wrong it is wrong doesn’t matter how you dress it up’
‘the plea of environmentally friendly is rubbish’
‘a law cannot be this flexible otherwise it would be the chance for
people to come up with excuses for their dishonest actions’
‘a crime is a crime regardless of why ... there are always reasons’
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Reflections
There are solid foundations in terms of awareness and
support for competition policy and enforcement amongst the
Australian public
The ACCC campaign to ‘sell’ criminalisation over the last 10
years has yielded strong results – 42% of Australians agree
that cartel conduct should be a crime
Its message that such conduct is morally wrong (as well
as economically harmful) appears to resonate
But there is still a long way to go in persuading people
that it is conduct for which individuals should go to jail
For more information:
see http://www.cartel.law.unimelb.edu.au
Questions?
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© Copyright The University of Melbourne 2008